What’s better for the customer: A sales person on commission or salary?

A few weeks ago, when the snow started to fall and not melt, and the Parks Highway could be mistaken for an ice rink, I decided it was time to purchase snow tires for my Jeep.

As I called around to compare prices and availability, I soon realized a distinct difference in the cost of tires at certain stores. When I called a national chain’s store that handles tires in Anchorage and is not on commission, I received a mid-level price quote and less intense discussion. When I contacted the largest Alaska multi-store tire shop, I received a very high quote and a determined, if not aggressive, pitch from the sales associate.

Contacting a few more tire stores revealed a clear pattern: stores with sales staff on commission were charging me more than those with sales staff on straight salary.

I ultimately used a tire shop in between Palmer and Wasilla that is not a chain, does not have commissioned sales staff and by far had the least price (and to my delight, a four-hour turnaround on same-day drop-off).

The headline of this column could be, “The benefit of researching services and prices,” but as the holidays endure and businesses eagerly solicit frenzied customers, don’t rule out fine-tuning your shopping style and patronizing businesses with salaried employees to avoid the obsequious, presumably self-serving and notably higher price-tagged products at commissioned businesses.

A Nov. 20, 2013 New York Times article by Stacy Perman headlined “For Some, Paying Sales Commissions No Longer Makes Sense” highlights my concern.

The article reviewed the success of ThoughtWorks, a Chicago software company that went against the grain of long-practiced business protocol by reconfiguring all of its commissioned salespersons to salary compensation. Instead, 40 higher-level salespersons in 12 countries suddenly don’t get a percentage of profit from what they sold. The price is the price, no matter how aggressive they press the client or cleverly they spin the pitch.

Perman focused on the perspective of the business owner, citing that, “The proponents of ditching commissions believe they foster negative behaviors, such as focusing on an individual’s profit over the company’s, emphasizing short-term outcomes and encouraging unproductive competition among sales representatives. Even companies that pay commissions can face costly turnover as representatives chase more lucrative offers.”

But it’s not just about the employer and employee. We, the people buying the products, services and merchandise, also appear to get a lower price and likely a more straightforward sales presentation when the staff person’s income isn’t inextricably linked to the bottom line.

I figure if sales staff know their salary won’t ebb and flow with sales, and a salary raise or merit-increase will still be applied based on performance, ultimately the customer, business owner and employee win. Add to the mix that sales staff on commission likely don’t savor cutthroat competition.

Perman’s article also referenced Canada’s Royal Auto Group. Back in 1991, the owner ended the sales commission model and incentive targets. Shifting to salaried employees ended high turnover among sales staff while increasing profits and forging a stable work environment that kept employees over longer durations than typical car dealerships. Owner Terry Ortynsky even admitted, when it came to commissioned salespeople, conflict exists “between doing what was right for the customer and an individual who wanted to earn a higher salary.”

When I think of the commissioned employees in Mat-Su and Anchorage that I’ve worked with, and this is not all-inclusive because exceptions exist, I think of jewelry stores, media centers (print, TV, radio sales), tire and auto/truck sales, travel agents, high-end clothing and shoe stores, high-end commercial building parts and even my own industry, graphic and web design.

For the latter, I read with interest last year a massive press release blitz of multiple hires of designers and staff for an Anchorage design firm. I did a little research and figured out the firm had hired at least three new designers and associates who were not salaried and worked instead on commission. Prices were jacked up so they could earn a decent wage, and the competition in-house was fierce. The last time I checked, all three employees had left the firm. It’s likely the firm now lacks consistency in services and depth of experience, and all because the commission structure didn’t work for anyone.

I’m sure a business owner with commissioned employees might balk at my assertion that salaried employees result in lower pricing for the customer. There’s no doubt in my mind that incentive-only and merit-based salary paradigms occasionally work in certain fields. I also recognize a salary is financially harder on the owner because of tax and benefit implications. I’m a business owner with employees, so I get it. But for the most part, I feel commissioned employees are too hungry, too aggressive and too dependent on each sale so they can eat and live and compete with their colleagues. In total, these factors force an escalating price tag for the tire kicker and window shopper, let alone the concerted patron trying to get find a fair price in a tough economy.

Should you avoid businesses with commissioned sales personnel? Not necessarily.

Just remember to ask if the sales person is on commission and what that commission is, and then negotiate accordingly and make sure that beyond their benefit in the sale, you receive one, too.

As for studded tires and my research and effort, it paid off to shop in the Valley and to work with non-commissioned staff. They were just as eager to help as any commissioned employee at another company. They were professional, competent, and the sales transaction was less about filling their wallet and more about being part of a successful business.

I also saved $350.

Tom Anderson is host of the Tom Anderson Show on KVNT 1020 AM, 5 to 7 p.m., Monday through Friday.